CPI Misses Despite Rising Energy, Shelter Costs As Used Car Prices Plunge Most In 9 Years

Following yesterday's 'disappointing' miss in producer prices, headline consumer price inflation met expectations at +2.5% YoY - above PPI for the first time since Dec 2016 - as energy and shelter costs surge.

While CPI YoY met expectations, CPI MoM missed, rising just 0.2% (vs +0.3% expectations) after dropping 0.1% MoM in March.

However, Core CPI missed expectations as apparel and used car prices are slumping...

The index for all items less food and energy increased 0.1 percent in April. The index for household furnishings and operations rose 0.5 percent in April, the largest increase since April 2015, and the personal care index increased 0.7 percent.

The apparel index rose 0.3 percent in April after declining in March, and the tobacco index increased 1.3 percent. The medical care index rose 0.1 percent in April, with the hospital services index rising 0.2 percent, the prescription drugs index increasing 0.1 percent, and the physicians' services index unchanged. The indexes for education and for alcoholic beverages also rose in April.

The index for used cars and trucks fell 1.6 percent in April, the largest decline since March 2009.

The recreation index fell 0.4 percent, the largest decline since December 2009. The index for airline fares fell 2.7 percent in April, and the new vehicles index declined 0.5 percent. The index for motor vehicle insurance fell 0.2 percent, the first monthly decline since April 2017. The index for communication also declined 0.2 percent in April.

Bloomberg’s chief U.S. economist Carl Riccadonna wrote in a note today, the tone of the May FOMC statement and subsequent Fedspeak signals a sanguine outlook among officials regarding the prospect of inflation settling near the central bank’s 2% objective over the medium term.

And a closer inspection of the CPI helps to explain why policy makers’ confidence is well placed: The pickup in inflation over the past few months appears to be overstated, and cell phone contracts are largely to blame.

However, Shelter- and Rent-Inflation are picking up again...

  • Shelter Inflation 3.4% Y/Y, vs 3.3% in March

  • Rent Inflation 3.7% Y/Y, vs 3.6% in March